External audit is a routine check of records and/or procedures performed by the certified auditors who are not the part of the company to be audited. It helps both the company and government to check accounting documents. An external audit can be conducted voluntarily or non-voluntarily by the outsider. The external audit is prepared to check the accuracy of statements and an organization’s financial standing.
An external auditor is a professional, independent third party that performs an unbiased review of the financial records of a certain company. The auditor must evaluate the organization’s records, including payroll, purchasing records and accounting. He/she also looks at the financial investments and organizations loan structure to identify any irregularities.
An external audit comprises the following stages:
External audit is compulsory for all the companies registered in the UAE. The mandatory compliance with International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) has made the external audit report a significant document. The external audit report acts as a definitive financial document at the time of license renewal, getting a loan, etc. The other benefits of an audit report are:
External auditors are trained and certified professionals to evaluate and improve the business process to reduce the risks caused by improper financial data. As they are not related to the organization, there is an element of impartiality to the audit report.
A small business owner may not have thorough knowledge of accounting. They prepare simple accounting information which is later reviewed by the external auditor. The auditor checks the information and provide insights on its reliability and validity. Accurate and valid accounting information can help business owners secure loans from lenders and investors.
An external audit helps an organization identify errors in its financial statements. Professional auditors recommend corrective solutions to any errors found in financial statements.
An external audit report ensures for the stakeholders that the financial data shows a true and fair view. It also enhances the reliability and credibility of the organization.
Alriyadah is a financial consultant in UAE offering a wide range of business services, including accounting, auditing, software consultancy, and management. We have been providing the best audit services in UAE and other areas as well. At Alriyadah, we follow precise and proven approach to ensure that every item requiring investigation and verification of financial records is properly substantiated.
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Internal audit is performed by the auditors who are appointed by the company while external audit is performed by the third-party auditors appointed by shareholders.
An external audit report is very useful in free zones and it is also required during the loan sanction by banks in the UAE.
IFRS stands for International Financial Reporting Standards. It is an international accounting framework followed by 120 countries in logging accounting information.